📚 Acrostics Anatomy: Garuda Indonesia’s Clipped Wings
Indonesia’s flag airline is back in a quagmire even after three rounds of debt restructurings.
📒 Quick Take: Garuda Indonesia Needs Boosters (24 April 2025)
📒 Quick Take: Garuda Indonesia Must Get Creative (25 April 2025)
📒 Quick Take: The Garuda Fix (26 April 2025)
📒 Quick Take: Lining Up the Garuducks (29 April 2025)
📸 Snapshot: Garuda Indonesia’s Pressure Points (1 May 2025)
💼 Brief Take: Garuda Shield (3 May 2025)
📸 Snapshot: GMF AeroAsia 1Q25 Results (4 May 2025)
📒 Quick Take: Indonesia’s Growing Disconnect (6 May 2025)
📒 Quick Take: Indonesia’s Restructuring Fault Lines (13 May 2025)
💼 Brief Take: Indonesia’s SOE Accountability (16 May 2025)
📒 Quick Take: Garuda Indonesia’s Pilot Mutiny (28 May 2025)
📒🤖 Quick Take: Legal Route for Garuda Indonesia’s Fourth Restructuring (16 June 2025)
📒 Quick Take: Garuda Indonesia Needs Boosters
24 April 2025
The Indonesian flag airline needs state capital to plug its negative equity.
The question is how much the Indonesian government can realistically inject into Garuda.
Even after going through three rounds of debt restructurings, Indonesian flag airline Garuda Indonesia still needs boosters to remain airborne.
There have been talks over a potential capital injection from the government, according to three friends familiar with the matter.
Garuda has been struggling to meet the aircraft maintenance expenses required by its lessors and was forced to ground some of its planes due to a lack of parts. The airline will also have to pay cash interest on its restructured bonds when the agreed payment-in-kind (PIK) terms expire, one of the friends noted.
Furthermore, revenue growth was capped by President Prabowo Subianto’s order to keep airfares affordable for domestic passengers. Garuda and its budget unit Citilink had to cut their ticket prices by as much as 19% during the latest Muslim holidays, which are typically the peak travel period as millions of Indonesians return to their hometowns.
Garuda posted a 16% increase in operating revenue to USD 3.4 billion last year, but this was eroded by a jump in operating expenses to USD 3.1 billion, according to its 2024 report.
Finance cost also rose to USD 479.9 million, from USD 456.8 million a year earlier, mainly due to higher “estimated liability for aircraft return and maintenance cost.” Other income fell to USD 55.2 million from USD 344.8 million on lower “impairment reversal of non-financial assets.”
As a result, Garuda swung to a USD 69.8 million loss from a USD 252 million profit a year earlier. Total liabilities stood at nearly USD 8 billion as of end-2024, out of which USD 1.2 billion was due in the short term, while cash and equivalents amounted to USD 219.2 million.
With a negative equity of USD 1.35 billion, Garuda needs more state assistance to plug that hole. The question is how much the government can realistically inject into the carrier.
In 2020, Garuda was allocated IDR 8.5 trillion (USD 504.4 million) of pandemic support from the government, but the airline only received IDR 1 trillion in the first quarter of 2021 and failed to fulfill the conditions to access the rest of the funds.
The SOE Ministry had to step up its lobbying and former President Joko Widodo eventually approved a IDR 7.5 trillion capital injection after Garuda completed its local in-court restructuring (PKPU) in 2022, according to local reports.
Finance Minister Sri Mulyani Indrawati has long been allergic to bailouts, especially after the Bank Century scandal in 2008, and she insisted that state funds should be used for working capital instead of paying creditors.
However, the money for Garuda was like a drop in the bucket as the airline faced stiff competition from domestic rival Lion Air Group and regional carriers.
Sri Mulyani might be asked by her current boss, Prabowo, to save Garuda again in the name of national pride, but she’s grappling with a lower-than-expected tax collection and a long to-do list. State-owned banks may also balk as they have enough headache from their construction peers, Wijaya Karya and Waskita Karya, which are heading for another restructuring.
The third player is new sovereign fund Danantara, which is set to gradually oversee all SOEs. I wrote last year that Danantara’s architects likely hoped that they could leverage SOE assets and get a cheaper cost of funds through economies of scale.
An advisor friend said it’s possible to structure the debt issued by Danantara, but the pricing could be affected by its ranking compared with the existing debt at the operating company level. Furthermore, investors may also question whether Danantara’s debt is on or off the government’s balance sheet.
It’s obvious that Garuda needs more money to continue flying, but at what cost?
📒 Quick Take: Garuda Indonesia Must Get Creative
25 April 2025
The options for Garuda are a capital injection, a fourth restructuring and a turnaround.
The flag carrier will need a creative solution for its financial and operational challenges.
Garuda Indonesia may fly into another turbulence ahead and this time the Indonesian flag airline has more limited options.
I’ve laid out yesterday why Garuda is weighed down by negative equity and aircraft maintenance expenses even after three rounds of debt restructurings. Now let’s look at the options along with the pros and cons.
Capital Injection
Finance Minister Sri Mulyani Indrawati is fighting fires on both the domestic and international fronts, including a tax shortfall, the risk of capital flight and US tariff hikes.
President Prabowo Subianto’s wishlist is also growing longer by the day and the Finance Ministry is now supposed to provide guarantees for foreign investments into the new capital in Kalimantan. The former World Bank managing director is likely to push back against any request to inject more capital into Garuda, even though her boss has the final say.
Indonesian banks have their own pain, as deposits are shrinking while non-performing loans are going up. Apart from cracks in the construction sector, state-owned lenders have to manage a rise in mortgage defaults amid widespread job losses. Bank Mandiri is reportedly auctioning 3,000 seized houses at a 50% discount to market prices.
It’s possible for new sovereign fund Danantara to issue debt at the holding level and transfer the funds down to the SOEs, but the pricing may not come as cheap as the officials hoped for. Furthermore, potential investors would likely want to know the use of proceeds and they may not be keen to save a troubled airline.
Fourth Restructuring
The difficulty level for a new round of restructuring has increased because Garuda already went through a local in-court restructuring (PKPU) in 2022. The bankruptcies of Sritex and Arpeni Pratama Ocean Line are a cautionary tale for Garuda as it’s unlikely to get another chance if it defaults on its PKPU agreement.
Indonesian coal miner Bumi Resources also attempted a post-PKPU restructuring, but faced a potential holdout given that a Chinese bank’s request to be repaid faster risked upsetting the balance with other creditors. In the end, local conglomerates Salim Group and Bakrie Group swooped in with an equity deal partly to safeguard Bumi’s key mineral assets.
Garuda may struggle to find a white knight like Bumi did because most of its planes are leased and any prospective investor would have to deal with the Indonesian government.
The airline is also running out of carrots as it already dangled the promise of a listing on the Indonesia Stock Exchange during its second restructuring. This time, the patience of some lessors might be wearing thin.
Turnaround
As a state-controlled airline and publicly listed company, Garuda comes under more scrutiny than Lion Air Group, which is privately owned by Indonesian tycoon Rusdi Kirana and his family.
Lion Air also had to restructure its debt after being hit by the pandemic, but Kirana managed to get lessors to play ball by setting up a new airline, Super Air Jet, and waving the stick of leaving dissenting creditors behind. The group was also able to ramp up its fleet and gain significant market share when travel recovered.
Garuda pulled off its latest restructuring thanks to its state backing, but it struggles to compete with the nimbler Lion Air and regional rivals such as AirAsia, Jetstar and Singapore Airlines.
A consolidation or a merger with another airline might be out of the question for Garuda because of nationalistic reasons. Hence, the flag carrier is pinning its hopes of a turnaround on its new CEO, Wamildan Tsani Panjaitan, whom it poached from Lion Air in November 2024.
Garuda will need the best minds to come up with a creative solution for its financial and operational challenges.
📒 Quick Take: The Garuda Fix
26 April 2025
Garuda had to pay for the sins of past managements as the Indonesian flag airline was saddled with expensive leases.
A potential solution is a revenue-sharing agreement whereby Garuda provides its brand and landing rights to a partner who can help it expand to growth markets.
Earlier this week, a friend close to Garuda Indonesia’s creditors wondered out loud how the flag airline ended up back in a rough patch after no fewer than three restructurings.
I wrote that Garuda is essentially in a Catch-22 situation where the state-controlled carrier needs cash to reactivate its grounded planes, but it struggles to earn money without a competitive fleet. I also did a scenario analysis of Garuda’s options and asked if there’s a creative fix for its plight.
Based on my chats with aviation and restructuring friends, I realized that the fundamental question is whether Indonesia could afford to keep Garuda alive as running an airline is such a capital-intensive business.
Furthermore, Garuda had to pay for the sins of past managements as it was saddled with the baggage of expensive leases that reportedly cost as much as 28% of revenue.
Garuda completed a nearly USD 10 billion restructuring in 2022, which included new lease terms for its remaining planes as well as a debt swap with USD 825 million in nine-year bonds and USD 330 million in fresh equity.
The airline pulled off its third restructuring mainly because it was seen as a sovereign entity and the Indonesian government promised a capital injection if creditors gave their consent.
The deal lengthened Garuda’s runway, but the carrier still has to generate enough cash to service its restructured debt. Like other Indonesian state-owned enterprises, Garuda faces the challenge of balancing its commercial duties and public service obligation of maintaining the affordability of domestic airfares.
Rather than trying to reconcile these diametrically opposite goals, a restructuring friend said that Garuda might be better off focusing on one task. If Garuda’s mission is to increase connectivity across the sprawling archipelago, then the Indonesian government should subsidize the loss-making routes, according to this friend.
An aviation analyst questioned whether Indonesia even needs a flag airline as the money could have been used for other purposes. While I agree that pride comes at a cost, President Prabowo Subianto’s grandiose nature makes it hard to imagine that the former army general would allow Garuda – which was founded two years after Indonesia’s independence in 1945 – to go down under his watch.
This brings us to the next option.
Edward Gustely, Managing Director at Penida Capital Advisors, said that the best outcome would be a revenue-sharing agreement whereby Garuda provides its brand, intellectual property and landing rights to a strategic investor who can help it expand to growth markets such as South Asia, Central Asia and Africa. “This allows Garuda to internally restructure, service its existing aircraft leases and reduce its legacy costs.”
In short, given that an outright sale might become politicized, Garuda can retain the ownership of its assets while partnering with someone who brings capital and management skills to the table.
This option makes sense to me, but Garuda will have to line up the ducks and this is the hardest to execute.
📒 Quick Take: Lining Up the Garuducks
29 April 2025
The potential gameplan for Indonesian flag airline Garuda to get the buy-in from stakeholders and avoid bankruptcy.
It’s going to be a tough play, but it could be one for the history books.
Any restructuring or turnaround involves getting the buy-in from stakeholders and finding a solution that most of them can live with, but Garuda Indonesia’s case will likely raise the difficulty level to new heights.
To recap my previous takes, these are the parameters:
Garuda went through three restructurings, with the latest being a local in-court restructuring (PKPU) in 2022. A creditor can file Garuda into bankruptcy if the Indonesian flag airline defaults on its PKPU agreement.
Aircraft maintenance and repairs have been a bugbear for Garuda, which was saddled with expensive leases as a legacy of its past managements. The carrier must also service its restructured debt including bonds and bank loans.
Liquidating Garuda and starting afresh might be the easiest path, but this is unlikely to happen under President Prabowo Subianto, who has been championing his “Golden Indonesia” vision to his voters.
Now that we’ve established the rules of the game, let’s look at the potential gameplan.
The biggest problem for Garuda is that it already took the PKPU route, which means that it would be left exposed in Indonesia if it misses any payment or breaches any term under its 2022 agreement.
The bankruptcy of Indonesian shipping company Arpeni Pratama Ocean Line in the hands of Bank CIMB Niaga in 2019 underscores that a single dissenting creditor can nuke a post-PKPU deal that relies on an out-of-court amendment provision.
I wrote last week that Garuda is running short of carrots to offer its creditors given that it had already deployed an initial public offering (IPO) and a capital injection from the Indonesian government to get its previous restructurings across the line.
The best option now is therefore a partnership with a strategic investor who can bring in fresh capital and the expertise to expand into new markets, while giving Garuda the latitude to work on a fourth restructuring.
The joint venture-restructuring combo will probably be an easier pitch in Indonesia, which has the world’s largest Muslim population, if the partner is a Middle Eastern airline such as Emirates, Qatar Airways or Etihad Airways. These airlines are also likely to be existing clients of Garuda’s lessors, which may help in negotiations.
“With the rejuvenated entity, further negotiations can be entered into with its creditors and lessors to restructure each of its outstanding debts and liabilities,” said a lawyer friend with cross-border restructuring experience. In short, Garuda may have to pursue bilateral or one-on-one restructurings to avoid Arpeni’s fate.
Garuda will have to shore up its defense in case a creditor tries to push it into bankruptcy in Indonesia. A Chapter 11 filing in the US can provide a wide-reaching shield for Garuda, but it’s typically very expensive.
A more feasible option might be a Singapore proceeding, considering that the Singapore International Commercial Court (SICC) already recognized Garuda’s PKPU deal last year and the city-state has been trying to promote itself as a regional restructuring hub.
Garuda can potentially apply for a Singapore moratorium by showing that it has a “proposed plan in place” with the support of major creditors, but “the Court would keep a tight leash,” according to a Singapore-based lawyer friend. It’s also possible to get a Singapore moratorium recognized in Indonesia, as Indonesian textile company Pan Brothers’ court victory over one of its lenders, Bank Maybank Indonesia, has shown.
However, there’s a caveat. While most offshore lessors, banks and bondholders would comply with a Singapore court order because of their international presence, the local creditors are a wild card. Garuda’s Indonesian lawyers will therefore have to be the goalkeeper and fend off any bankruptcy petition on the airline’s home ground.
It’s going to be a tough play, but it could be one for the history books.
📸 Snapshot: Garuda Indonesia’s Pressure Points
1 May 2025
Garuda must start paying cash interest on its restructured bonds over the next six years.
The Indonesian flag airline also had to revert to making fixed lease payments after its rental concessions ended.
Garuda Indonesia must adjust its trajectory soon because the Indonesian flag airline is facing escalating costs to service its restructured debt this year.
Garuda just released its 1Q25 results, which showed that its negative equity had widened to USD 1.43 billion as of 31 March 2025 from USD 1.35 billion as of end-2024.
The state-controlled carrier will also have to navigate these hurdles:
Bonds
“New Bonds 2022 bear fixed interest rate at 7.25% per annum that is accumulated over the first two years into the principal amount (Payment in-kind) and hereafter subject to interest rate at 6.5% per annum paid every three months until maturity. New Bonds 2022 will mature on 28 December 2031 and can be repaid at anytime, at the nominal value plus the number of accumulated period distributions until the settlement date.”
“As at 31 March 2025, total outstanding New Bonds 2022 is amounting to USD 599,183,842 includes the capitalisation of the interest during 2025 amounting to USD 10,724.041 (2024: USD 599,165,924 includes the capitalisation of the interest during 2024 amounting to USD 41,594.433).”
Eveline’s Translation:
Garuda must start paying a 6.5% cash interest on its restructured bonds this year following the expiry of its 7.25% payment-in-kind (PIK) interest. Based on the total outstanding bonds of USD 599.2 million, that amounts to a USD 38.9 million cash interest per year, with quarterly payments until maturity.
In short, apart from having to pay cash interest over the next six years, Garuda also has to cover the bond principal in 2031. Garuda’s cash and equivalents stood at USD 223.8 million as of 31 March 2025.
Leases
“The Company has restructured portion of its lease liabilities as a result of the Homologation decision on 27 June 2022. On 28 December 2022, the Company issued new instruments in the form of equity (Note 28) and bonds payable (Note 25).”
“For the year ended 31 December 2022, the Company obtained rental concessions amounting to USD 275,037,263 because based on the results of the Homologation decision, the fixed monthly rental for the period 2022 was changed to a power by the hour (PBH) without minimum flying hour scheme. This scheme ends in December 2022, June 2023 or December 2024, depending on lease contracts.”
Eveline’s Translation:
Garuda restructured some of its leases as part of its local in-court restructuring (PKPU) in 2022, which included a swap into new equity and bonds. The airline also received USD 275 million of rental concessions as it was allowed to use something like a ‘pay as you go’ model without minimum flying hours.
However, these concessions ended in December 2022, June 2023 or December 2024, depending on the lease agreements. In short, Garuda likely had to revert to making fixed lease payments, which would strain its finances.
Bank Loans
“GMFAA’s bank loan facility from BNI is secured by certain fixed assets. In relation to this agreement, GMFAA has to comply with financial ratio which debt service coverage ratio of 100%. The GMFAA has obtained waiver for the financial ratio covenants until 31 March 2025. As at 31 December 2024, the GMFAA has complied with the covenant in the borrowing agreement.”
Eveline’s Translation:
Garuda’s aircraft maintenance unit, Garuda Maintenance Facility Aero Asia (GMFAA), obtained a covenant waiver from Bank Negara Indonesia (BNI) that expired on 31 March 2025.
It’s unclear whether GMFAA was able to extend the waiver, though BNI is a state-owned lender that may not seek enforcement against the flag airline’s subsidiary. Still, this raised questions of whether Garuda and its units are able to comply with their loan covenants or at risk of any breach.
Trade Payables
It’s worth noting that trade payables owed to third parties increased to USD 171.7 million as of 31 March 2025 from USD 151.3 million as of end-2024. These included payables for airline services such as catering, maintenance and repairs, as well as fuel. Trade payables to related parties fell to USD 376.2 million from USD 380.7 million over the same period.
💼 Brief Take: Garuda Shield
3 May 2025
One of the biggest risks for Garuda may come from individual trade creditors.
The Indonesian flag airline may have to protect itself from creditor action and negotiate a standstill or a moratorium sooner rather than later.
Garuda Indonesia has at least 15 jets grounded because it’s struggling to make maintenance payments, Bloomberg reported on 2 May 2025. Some suppliers to Indonesia’s flag carrier are also requesting advance payments for parts and labour due to concerns over its financial situation.
Eveline’s Take:
🛡️ I flagged on 24 April that Garuda has been struggling to pay the required aircraft maintenance expenses and was forced to ground some planes due to a lack of parts. I also wrote on 1 May that the airline faces escalating costs to service its restructured debt, including bonds and leases, while trade payables owed to third parties increased to USD 171.7 million as of end-March.
🛡️ Based on the latest turn of events, one of the biggest risks for Garuda may come from individual trade creditors. Garuda’s travel system unit, Aero Systems Indonesia, reportedly entered a local in-court restructuring (PKPU) on 22 April after the Jakarta court granted a petition filed by Gerardus Hernowo Mahendro.
🛡️ At the first meeting with creditors on 30 April, one of the court-appointed administrators urged vendors to continue their services because Aero Systems plays an important role in supporting Garuda's flight system. Even if the vendors play ball, this PKPU petition risks emboldening other creditors that may not have been paid by other Garuda subsidiaries.
🛡️ The Bloomberg report that some suppliers are asking to be paid in advance is also bad news because it means that they no longer have the confidence to extend trade credit to Garuda. This is the Achilles’ heel that unwound Indonesia’s textile sector, as Sritex and Pan Brothers also had to pay their suppliers faster while taking longer to collect cash from customers. These textile companies relied on loans and bonds to cover the cash conversion gap, but their access to the debt markets shrank after the default of Duniatex Group.
🛡️ Given that Garuda had gone through three restructurings and is flying towards a fourth one, it will likely struggle to get fresh credit while its existing lenders might be running out of patience. The airline may have to protect itself from creditor action and negotiate a standstill or a moratorium sooner rather than later.
📸 Snapshot: GMF AeroAsia 1Q25 Results
4 May 2025
Garuda Maintenance Facility Aero Asia (GMF AeroAsia), the aircraft maintenance unit of flag airline Garuda Indonesia, has released its results for the three months ended 31 March 2025. These are some of the highlights.
✈️ Cash more than halved: Cash and equivalents fell to USD 9.4m as of end-March 2025 from USD 20m a year earlier. On the operating side, GMF received USD 101m in cash from customers, but paid out USD 63.7m to suppliers and others as well as USD 31.6m to employees. Cash outflows from financing activities included USD 4.3m in repayments of long-term borrowings and USD 1.7m in principal payments of lease liabilities. The company also purchased USD 1.2m of fixed assets during the quarter.
✈️ Negative equity slightly narrowed: GMF reported a negative equity of USD 253.4m as of end-March 2025, compared with USD 257.9m as of end-2024. Total liabilities stood at USD 665.8m, of which USD 228.9m was due in the short term. GMF’s bank lenders include Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI), Indonesia Infrastructure Finance (IIF), Maybank and CTBC.
✈️ Big subcontract savings: GMF’s pre-tax profits jumped 41.9% to USD 6.2m in 1Q25 from a year earlier, even though revenue fell slightly to USD 95.4m. The company managed to slash its subcontract expenses (consisting of subcontract components, technical and ground handling services) to USD 14.6m from USD 24.3m.
📒 Quick Take: Indonesia’s Growing Disconnect
6 May 2025
The economy grew at the slowest pace in over three years and far below the president’s 8% target.
Indonesia cannot have its cake and eat it too.
The disconnect between Indonesian President Prabowo Subianto’s ambition and the reality on the ground is becoming starker by the day.
I flagged that Indonesia’s economy was likely weaker than what the numbers previously stated because of these tell-tale signs:
Widespread layoffs in the labour-intensive manufacturing sectors such as textiles. Many of these jobs are not coming back because it’s cheaper to produce elsewhere.
Indonesians are dipping into their savings, as indicated by the loan-to-deposit (LDR) and current and savings account (CASA) ratios. This may translate into a higher cost of funds for local banks.
Mortgage defaults are climbing, which suggests that stress is building in the lower and middle-income classes.
Official data released yesterday showed that Indonesia’s economy grew 4.87% in the first quarter of 2025, the slowest pace in more than three years and far below the president’s 8% target.
Economists were counting on government spending to pick up the slack from lacklustre consumption, yet it contracted by 1.38% in 1Q25 due to “policy adjustments and sluggish disbursement”, according to a note from Bank Mandiri.
The president ordered massive spending cuts to fund his signature free school lunch program, which has been marred by food poisonings on top of costing a whopping USD 10 billion this year. Feeding children is a worthy cause, but the problem is it’s coming at the expense of other areas, such as infrastructure development and higher education funding.
I wrote that Indonesian state-owned builders Wijaya Karya and Waskita Karya are struggling to dig their way out of their debt pile as the state budget for construction has shrunk under the current administration. Flag airline Garuda Indonesia is also grappling with the costs to restore its grounded planes and service its debt while being constrained from increasing ticket prices.
There’s talk that Indonesian officials are working on raising funds to save Garuda via new sovereign fund Danantara, but potential investors will likely ask whether there’s going to be a state guarantee.
While state-owned enterprises such as Perusahaan Listrik Negara (PLN) and Pertamina have raised billions of dollars thanks to a so-called implicit state backing, I wrote that this “sovereign halo” would come under higher scrutiny from the market given the latest developments.
In short, Danantara has the potential to be a new engine for growth, but it’s also not a saviour who can rescue the troubled SOEs without breaking a sweat. Even if Garuda could pull off a fourth restructuring, the state-controlled carrier would still find it hard to make money if the government maintains the cap on domestic airfares. The president also asked Garuda to offer the cheapest rates possible for the Muslim pilgrimage to Saudi Arabia.
Indonesia cannot have its cake and eat it too – the question is whether the leaders can accept this and make a choice before it’s too late.
📒 Quick Take: Indonesia’s Restructuring Fault Lines
13 May 2025
The potential options are to restructure the debt one by one, protect the key units, or start a new company.
All three options are unpalatable for flag airline Garuda Indonesia, so officials might be tempted to throw just enough cash at the problem.
The fault lines in Indonesia’s restructuring framework have been laid bare as more companies are at risk of re-defaulting on their earlier debt deals.
On the macro front, I flagged that President Prabowo Subianto’s “Golden Indonesia” vision is increasingly diverging from reality, as the accelerating layoffs are forcing Indonesians to tighten their belts. Private investments are also hamstrung by a lack of security, as some businesses were held hostage by thugs masquerading as civic organizations.
A growing number of companies must restructure their debt again even after undergoing a court-supervised restructuring (PKPU). I wrote that Pan Brothers may have to restructure for the third time due to a collapse in textile demand, while Garuda Indonesia could be headed for a fourth one as the flag airline grapples with maintenance costs and an airfare cap imposed by the government.
The first fault line is that PKPU is like a last chance saloon where borrowers have one shot at an in-court restructuring and could be filed into bankruptcy if they re-default, as shown by the demise of Pan Brothers’ peer Sri Rejeki Isman (Sritex) and shipping company Arpeni Pratama Ocean Line).
The second fault line is that a PKPU deal only binds the entities that went through the process, meaning that the subsidiaries that were left out are still exposed to creditor action. Garuda completed PKPU in 2022, but a trade creditor could still file a PKPU petition against its travel system unit, Aero Systems Indonesia, which was granted by a local court last month.
The third fault line is that even if the company pursues another restructuring in a foreign jurisdiction, such as Singapore, the deal may not be recognized in Indonesia. In short, a borrower and its advisers may go through the whole dance with creditors overseas only to find out that a local supplier can turn off the light back home.
Given these fault lines, there are three potential options:
Restructure the debt one by one
Protect the key units
Start a new company
The first option is a huge undertaking for a borrower and its advisers, as they will have to leave no stone unturned and negotiate bilateral deals with each of the creditors.
The second option is worth considering if there are certain subsidiaries that are important enough and vulnerable to creditor action. Out of 15 grounded planes, Garuda’s unlisted budget unit Citilink accounts for 14 while the remainder is under the flag carrier. In short, Citilink is in an even deeper quagmire than its parent and could be the top candidate for a moratorium.
Lion Air’s founders used the third option and set up Super Air Jet, but I wrote that it’ll be harder for Garuda – as a publicly listed state-owned enterprise – to follow this playbook. As for Pan Brothers, even if its management were to start a new entity (Pan Sisters?), some creditors may put up a fight and it’s uncertain how long the new company can last without working capital.
All three options are unpalatable for Garuda, so officials might be tempted to throw just enough cash at the problem and pray that it’ll resurface later rather than sooner. I wrote on 24 April that a direct capital injection from the government would be a tough sell in this economic climate, so rescuing Garuda via new sovereign fund Danantara could be a workaround.
Given that raising fresh funds from investors will likely invite questions, Danantara may pool the dividends it receives from SOEs and transfer the money to Garuda through a shareholder loan. However, if the underlying tumour is not fixed, Garuda should be back in hospital a few years down the road.
💼 Brief Take: Indonesia’s SOE Accountability
16 May 2025
Dividends from state-owned enterprises are now upstreamed to sovereign fund Danantara instead of flowing into the state budget, leaving the Finance Ministry with a shortfall.
If Danantara were to use the SOE dividends to rescue flag airline Garuda Indonesia, will the money come with strings attached?
Flag airline Garuda Indonesia is in talks with Indonesian sovereign wealth fund Danantara over a potential capital injection, Bloomberg reported on 16 May 2025.
Eveline’s Take:
🛩️ I flagged on 24 April that Indonesian officials were likely to explore the option of saving Garuda via Danantara, as a direct capital injection would be hard to justify when the economy was slowing down. I also wrote on 13 May that Danantara may collect dividends from state-owned enterprises (SOEs) under it and pass some of the money to Garuda through a shareholder loan.
🛩️ Danantara’s Chief Financial Officer Arief Budiman told local media that the fund had received the SOE dividends last month. These dividends are now upstreamed to Danantara instead of flowing into the state budget, leaving the Finance Ministry with a shortfall. In March 2024, the Finance Ministry collected IDR 36.1 trillion (USD 2.2 billion) in dividends, mainly from the state-owned banks, according to Deputy Finance Minister Suahasil Nazara. This year, the Finance Ministry only took IDR 10.8 trillion (USD 656 million) from Bank Rakyat Indonesia in January, a month before Danantara was officially established.
🛩️ Garuda’s negative equity widened to USD 1.4 billion as of 31 March, as it continued grappling with aircraft maintenance costs and the domestic airfare cap even after restructuring nearly USD 10 billion of debt in 2022. If officials only intend to plug the gap without dealing with the baggage that has made Garuda uncompetitive, the money may only buy a few years for the airline.
🛩️ In 2020, Finance Minister Sri Mulyani Indrawati allocated IDR 8.5 trillion (USD 516 million) for Garuda as part of a pandemic support package, but the airline could only access IDR 1 trillion (USD 61 million) because it failed to meet the requirements. Former President Joko Widodo had to give the order to unlock the rest of the funds after Garuda completed its local in-court restructuring (PKPU) in 2022. Sri Mulyani – a former World Bank managing director – was consistent that state capital should come with accountability. If Danantara were to use the SOE dividends to rescue Garuda, will the money come with strings attached, such as performance metrics?
🛩️ Danantara’s CFO was also quoted as saying last week that the fund plans to issue loans or bonds at the holding level. I wrote in November 2024 that Danantara was designed for leverage, but lenders are likely to ask whether the debt would be on or off the government’s balance sheet. The latest news may also spur potential investors to scrutinize the use of proceeds.
📒 Quick Take: Garuda Indonesia’s Pilot Mutiny
28 May 2025
The pilots are unhappy that the new Garuda CEO hired a bunch of people from his previous company Lion Air.
Sovereign fund Danantara has to earn credibility in the market by fixing the SOEs under its watch, including Garuda.
A group of Garuda Indonesia pilots launched a mutiny this week, urging the Indonesian government to revamp the flag airline’s management. The Garuda Pilot Association held a press conference in Jakarta to air their grievances, displaying banners with slogans such as “Anxious Garuda Pilots” and “Pilot Solidarity”.
The pilot association – which is part of the wider labour union at Garuda – criticized recruitment practices that are not in line with corporate governance and cost efficiency that are supposed to be a focus for the state-controlled carrier. Garuda’s management also curtailed freedom of expression and tried to weaken the labour union, they added.
The group said there was a breakdown in communication whereby Garuda’s management viewed them as “adversarial”, instead of valuing their input. Garuda’s management even reported labour union leaders to the police over statements that were collectively released to the press, according to the group.
Garuda issued a strong rebuttal, saying that it prioritizes “harmonious” relations and open communication with its workers. Responding to the allegation that it sought to criminalize the labour union leaders, Garuda said it filed police reports against three individuals who spread “lies” about the recruitment process and “hurt the company’s credibility” in the eyes of investors, customers and staff.
The key source of discontent among the pilots appeared to be the move by the new Garuda CEO, Wamildan Tsani Panjaitan, to hire a bunch of people from his previous company Lion Air. Panjaitan himself was poached from Lion Air – Garuda’s privately owned rival – in November 2024 to turn around the flag airline.
Earlier this month, members of a parliamentary commission overseeing state-owned enterprises (SOEs) asked Panjaitan to explain why he hired 14 Lion Air staff at “fantastic” salaries and even provided an assistant for his wife when Garuda still had a negative equity. Panjaitan denied any wrongdoing and said that he had followed the procedures.
It’s unclear whether the Garuda pilots’ rebellion would have any impact on Panjaitan as the former Indonesian military pilot was reportedly handpicked by President Prabowo Subianto, who served as a four-star general. The president has an active interest in Garuda and would directly hand down instructions to Panjaitan, according to a friend who’s familiar with the matter.
This week, SOE Minister Erick Thohir said that Garuda is set to receive an undisclosed sum of money from sovereign fund Danantara’s operational arm for working capital. This is in line with the direction from the president, who wants Garuda to be an engine for growth in tourism, such as for the Muslim pilgrimage, the minister added.
I flagged on 24 April that Indonesian officials were likely to explore the option of saving Garuda via Danantara, as a direct capital injection would be hard to justify when the economy was slowing down. I also wrote on 13 May that Danantara may transfer some of the SOE dividends to Garuda through a shareholder loan, but I questioned whether this would come with accountability.
In a blow to Danantara, Bloomberg reported today that famed American investor Ray Dalio chose not to be on the Indonesian fund’s advisory board. When Danantara announced in March that Dalio would join an all-star lineup of advisors, I wrote that what really matters is the team dynamics and their ability to make independent investment decisions.
In short, Danantara has to earn credibility in the market without riding on the coat-tails of high-profile figures. One of the ways to do this is to fix the SOEs under its watch, including Garuda.
📒🤖 Quick Take: Legal Route for Garuda Indonesia’s Fourth Restructuring
16 June 2025
I asked ChatGPT: “What should be Garuda Indonesia’s legal strategy for its fourth restructuring?”
This is my take on ChatGPT’s take.
Indonesian officials have been preparing the runway for sovereign fund Danantara to inject capital into flag airline Garuda Indonesia.
Danantara CEO Rosan Roeslani told local media last week that it was evaluating the potential capital injection to add 15 planes for Garuda. While he didn’t elaborate, the funds might be allocated to reactivate the 15 planes operated by the carrier and its budget unit Citilink that are currently grounded.
Garuda will also seek shareholder approval on 30 June 2025 for a proposed restructuring and changes in management.
A group of Garuda pilots were unhappy that the new CEO, Wamildan Tsani Panjaitan, hired his former Lion Air staff, but a friend briefed on the matter said that the former military pilot – who was handpicked by the president himself – may keep his job and the upcoming reshuffle could be a change of the old guard.
Garuda is set to appoint a foreign director to optimize its restructuring, Bloomberg Technoz reported, citing a source with knowledge of the plan. I wrote last month that Danantara may transfer some dividends from the state-owned banks to help plug Garuda’s negative equity, but this ‘carrot’ must be paired with another restructuring, otherwise the airline would likely need more handout in a few years.
I’ve already outlined the potential routes, so today I tested out ChatGPT and asked: “What should be Garuda Indonesia’s legal strategy for its fourth restructuring?”
📒 Eveline’s Take on ChatGPT’s Take
ChatGPT was able to come up with conventional restructuring options, but the problem is that most of them – such as maturity extensions, debt-to-equity conversions and power-by-the-hour payments to lessors – were already used in Garuda’s earlier restructurings. I wrote in April that Garuda faces more limited options for its fourth restructuring and will likely have to get creative.
ChatGPT’s legal strategy also lacks the local context that if a borrower defaults on its PKPU agreement, a creditor can file it into bankruptcy under Indonesian law. An out-of-court attempt to re-restructure the PKPU debt also risks being torpedoed by a holdout creditor, as shown by Indonesian shipping company Arpeni Pratama Ocean Line’s bankruptcy in the hands of Bank CIMB Niaga in 2019.
I gave ChatGPT the prompt to apply lessons from the bankruptcies of Arpeni and Indonesian textile company Sri Rejeki Isman (Sritex), but it still didn’t give me the right answer.
ChatGPT pointed out that getting a moratorium and a prepackaged scheme in Singapore could be an alternative to a repeat PKPU. But I wrote last month that “even if the company pursues another restructuring in a foreign jurisdiction, such as Singapore, the deal may not be recognized in Indonesia.”
While ChatGPT can make suggestions drawn from an analysis of patterns or past cases, it hasn’t reached the level of creativity to devise a new strategy yet. A legal system like Indonesia could also be a blind spot for ChatGPT because, as my lawyer friend said, local courts are not bound by precedents and they consider each case as if it’s a new one.
My takeaway from this experiment is that ChatGPT is able to do some of the research, but a lawyer who can plan the overall legal strategy (especially in a cross-border restructuring) and a localized team should still be needed for now.
🤖 ChatGPT’s Take (Verbatim Excerpt)
For Garuda Indonesia’s potential fourth restructuring, the legal strategy must balance compliance, stakeholder management, reputational preservation, and operational continuity. Given the airline’s previous restructurings (especially the PKPU process in 2021–2022), a fourth attempt presents serious legal and commercial credibility risks. Here’s a structured legal strategy Garuda could consider:
⚖️ 1. Pre-emptive Assessment and Stakeholder Engagement
· Conduct legal diagnostics: Analyze current debt covenants, cross-default clauses, and local vs. offshore creditor exposure.
· Engage with key creditors early: Especially those holding large offshore bonds and lessors. Consider forming a Steering Committee of major creditors.
· Avoid PKPU if possible: The Indonesian court-supervised process helped last time, but may erode trust if overused. Out-of-court workouts (akin to Singapore’s pre-pack schemes) could be more credible internationally.
📜 2. Structure the Restructuring Legally via Dual-Track Options
A. Primary Route: Out-of-Court Restructuring (standstill + consent solicitation)
· Secure a standstill agreement from key lenders to buy time.
· Propose:
o Haircuts or maturity extensions (especially for non-secured or subordinated creditors).
o Equity conversions for some debts (convertible bonds, lease obligations).
o Participation in performance-linked instruments (e.g., profit-sharing or warrants).
B. Fallback Option: Use Singapore’s Revised Insolvency Framework
· Tap Singapore’s Insolvency, Restructuring and Dissolution Act 2018 (IRDA):
o Apply for moratorium relief under Section 64/65.
o Use Scheme of Arrangement or Pre-pack Scheme under Singapore courts for global reach.
o This provides credibility and global recognition, especially for dollar-denominated debt.
· This is preferable to a repeat PKPU, which lacks cross-border enforceability.
🛑 3. Mitigate Risks of Creditor Litigation
· Secure legal opinions on safe harbor provisions (especially for state-linked stakeholders).
· Seek rating agency consultation before any default moves to avoid triggering further covenants.
· Prepare for possible legal challenges from dissenting bondholders or lessors — structure deal terms with sufficient class-based protections.
✈️ 4. Address Lessors and Aircraft Obligations Transparently
· Many lessors restructured terms last time — be ready for renegotiation or aircraft repossession risks.
· Offer:
o PBH (power-by-the-hour) leases to match utilization.
o Or partial return of fleet, with long-term leasing flexibility.
· Anchor agreements with lessors as a show of restructuring viability.
🧩 5. Corporate Governance and Disclosure Safeguards
· Legal advisors should guide public disclosures to avoid misstatements or securities law violations.
· Include clear timelines, restructuring goals, and creditor engagement frameworks.
· State-owned enterprise (BUMN) status means coordination with Ministry of SOEs and parliamentary oversight — legal team must handle these stakeholders diplomatically.
🌏 6. Consider Multijurisdictional Legal Coordination
· Engage law firms with cross-border experience (e.g., Latham, Milbank, Sidley, or local alliances).
· Coordinate strategies for:
o US bondholder lawsuits (Rule 144A bonds).
o Singapore- or UK-based arbitration with lessors.
o Any ICSID risks (if bilateral investment treaties with creditor states are invoked).